CounterCurrent: Week of 10/03/2023
After my brief hiatus on maternity leave, it’s wonderful to be back to writing for CounterCurrent. School is back in session, fall has arrived, and yet again, the student loan repayment controversy is at the top of the news cycle. As of Sunday, borrowers are officially required to make payments after a three-year pause on student loan repayments. This comes after the Supreme Court struck down the Biden administration’s student loan forgiveness plan this summer.
As you may remember, the initial pause on student loans was intended to help borrowers land on their feet due to the economic turmoil and job instability of the COVID-19 pandemic. This reprieve was only meant to last for two months, but through political meddling and constant renewals (under both Trump and Biden), the program was extended until October of this year. Now more than 28 million borrowers have to pay up.
However, some borrowers will have some wiggle room as far as payments through September of next year. The government created a temporary on-ramp period such that “if any borrowers miss a payment before then, they won’t be reported as delinquent to credit agencies—but interest will still accrue, and credit score companies can still factor in the missed or late payments.” Also, President Biden is recommending that borrowers apply for his new Saving on a Valuable Education (SAVE) Plan, launched in August of this year, that “calculates payments using a borrower’s income and family size rather than their loan balance.” Some borrowers are happy with the administration's plan for easing back into repayments. But skipped loan payments will still accrue interest, which exacerbates the problems of poor credit and increased debts—a rather nasty, perpetuating cycle.
The ongoing politicization of this issue leaves us valuable lessons to be gleaned from the student loan forgiveness fiasco, suggests Andrew Gillen in his recent article on Minding the Campus. First is that by delaying student loan repayments, borrowers just took on more non-student loan debts (i.e., worsening their overall financial circumstances). Second, though the student loan forgiveness plan was a “noble effort” to begin with, it was seized upon by both sides of the aisle to further political agendas, costing taxpayers billions. Gillen explains,
Accounting for the cost of this additional time, the Penn Wharton Budget Model estimates the total cost at $210 billion, and the American Enterprise Institute’s Nat Malkus estimates a total cost of just under $240 billion for the program …
In retrospect, the student loan payment pause was a huge and costly mistake. While the initial pause may have been appropriate, it should have been clear that the pause would be extended for political reasons when an election was close, and for ideological reasons if progressives won the election. This predictable political hijacking of a decent policy is why we can’t have nice things.
Gillen is right—to protect well-meaning and good future policies from politically convenient hijacking, we must expect such an outcome and station safeguards within such legislation or regulatory action. As we watch this tangled mess unfold, one has to wonder if higher education policymakers will finally learn the hard lesson: that through-the-roof tuition sustained by government interference doesn’t help students or taxpayers in the long run. Until then, we’re left with an ever-growing mountain of debt and questions about who actually has to pay up.
Be sure to read Gillen's full article on Minding the Campus.
Until next week.
CounterCurrent is the National Association of Scholars’ weekly newsletter, written by the NAS Staff. To subscribe, update your email preferences here.
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